May 2011. The Scottish National Party won the Holyrood Scottish Parliament election.

May-June 2012. Yes Scotland and Better Together were launched.

October 2012. The Edinburgh agreement was signed. In the agreed referendum there was to be no third “devo-max” option on the ballot paper.

September 2013. I wrote in an email: If Scotland doesn’t choose independence, it doesn’t seem right that Scotland’s central bank should continue to be called the Bank of England.

January 2014. The Bank of England governor commented that a durable, successful currency union requires some ceding of national sovereignty.

March 2014. The Chancellor and the Chief Secretary to the Treasury stated that there would not be a formal currency union between an independent Scotland and the rest of the UK.

April 2014. I wrote in an email: I haven’t got any strong opinions about Scottish independence and I don’t think its my business. (I’ve only lived here for a few years).

25 August. Alistair Darling’s attempt to explain the currency problem in the second leaders TV debate was swamped by interruptions from Alex Salmond and the audience. The Yes campaign appeared to think that they had won the currency argument.

6 September. In a new YouGov opinion poll, support for Yes had increased, and was now greater than support for No.

8 September. American economist Paul Krugman commented that sharing a currency without sharing a government is dangerous, and if Scottish voters really believe that it’s safe to become a country without a currency, they have been badly misled.

11 September. In a graphic of a new Survation referendum poll, in Metro, the figures were shown the wrong way round. Perhaps someone at Metro had assumed that the popularity of Yes had continued to increase. Actually the trend had reversed.

12 September. Standing up in a bus to get a Metro, I fell over. The driver and other passengers were a bit upset, and I got a big bruise. Metro had reprinted the graphic with the correct figures and an apology for yesterdays mistake. No had got 53 percent and Yes got 47 percent.

16 September. Three new opinion polls were announced, with 52 percent No and 48 percent Yes. The leaders of the three main pro-union parties promised, in “The Vow”, that if independence was rejected further powers would be devolved to the Scottish Parliament, with a fair share of resources.

18 September. Referendum day. In the middle of the afternoon I went for a walk along a cycle path and past the polling place. I knew which way I wanted to vote but still wasn’t sure that it was my business to do so.

Later. The final opinion poll, taken on voting day, was 53 percent No, 47 percent Yes.

Bedtime. There was a rumour on the radio that North Lanarkshire, which was expected to have a No majority, had voted Yes. I went to bed and left the radio turned on.

19 September, early morning. Soon after midnight the first regional result was announced. Clackmannanshire had voted No, with a larger majority than had been expected.

About 3 hours after that, 7 regional results had been declared. The City of Dundee and West Dunbartonshire both had Yes majorities. No had 50.2 percent of the total votes announced.

About an hour later, 21 of the 32 regional results had been declared, and No had 55 percent of the total vote. Orkney had the highest No vote, 67.2 percent, and North Lanarkshire had voted 51 percent Yes.

Next came the Glasgow result, 53 percent Yes. This was only enough to reduce the No share of the total vote to 54 percent. This was the moment when it became almost certain that No had won.

Next time I woke up it was daylight and No had won with a 55 percent majority.

Later I went shopping. The sky was grey, there was light rain, winter is coming on, and I’m still in the UK. I felt quite cheerful.

The monetary reformer quoted some of my last lot of replies out of context, and didn’t put the rest on his blog. So I’m not sending him this lot, I’m just posting them here. I hope there won’t be any more.

X: For you, economics seems to be about money. For us, economics is about life.

A: That’s not fair.

You wrote: “Economic growth requires (at least in part) increasing loans. If loans do not increase, the economy, as it is presently structured, fails.“

That’s a purely monetary definition of economic failure. Also I think its wrong, from a monetary point of view as well as from a Green one.

I wrote “Economic growth or decline is about GDP, in other words, money. Sustainability is about resources, climate, population, and other species, as well as money.”

That definition of economic growth is not just my opinion. Wikipedia says: Economic growth is the increase of per capita gross domestic product (GDP) or other measure of aggregate income, typically reported as the annual rate of change in real GDP. (en.wikipedia.org/wiki/Economic_growth)

And we agree that there is more than just money to the definition of a sustainable economy, but I said it before you did.

X: I take it you standardised the figures for a generation according to the life expectancy at the time you were measuring?

A: Its about age at reproduction not life expectancy. I used lognormal distributions to model age-specific fertility rates, and let the computer find the numbers which fitted the data best. For more details, see “Couples and the K-wave” on my website.

X: If it is not created at the point a loan is made, where and when is it created, in your view?

A: You‘re arguing with yourself. I’ve already agreed that money is created when a loan is made.

X: One cannot sustainably borrow in order to provide for daily living needs.

A: As I’ve already commented, the mortgage system is an example of sustainable borrowing to meet daily needs, and its also an example of sustainable investment, usually, with exceptions, as in the last decade.

X: A: I have shown that [debt does not necessitate ever increasing production and productivity.]

A: The bit in square brackets was added by you. Its confusing without a hyphen after “ever”. You had written “Hoogendijk has shown that debt necessitates ever increasing production and productivity.” I replied that I had shown that it doesn’t. My opinion is that debt does not always make it necessary to increase production and productivity.

X: Two manufacturing firms . . . They are now in competition as before, but now they have to service their debt. How can this fail to drive both to boost throughput of materials?

A: You’re talking to yourself again. I didn’t say it would fail, I said they probably wouldn’t get into debt if the economy was unfavourable, because they wouldn‘t get a loan.

X: This system is an important driver of economic growth, since the real economy is burdened with the necessity of paying back interest.

A: Now you’ve gone full circle right back to where we started.

1. The real economy also benefits from the interest, which is paid to the depositor, from the borrower, through the bank.
2. The real economy is also burdened with the necessity of paying wages. Nobody thinks that wages should therefore be abolished.

I don’t want to go round this circle again so I hope there won’t be any more replies.

I sent some replies to a discussion about monetary policy on another blog, but they haven’t appeared. So I’m posting them here instead.

X: Economic growth requires (at least in part) increasing loans. If loans do not increase, the economy, as it is presently structured, fails.

A: This still says that equilibrium in the economy, as it is presently structured, is failure. Zero economic growth is statistically very improbable in any economic system, but a stable balance between small amounts of economic growth and decline is possible in the economy as it is presently structured. For me economic failure is what was happening in 2008, extremely negative growth.

Economic growth or decline is about GDP, in other words, money. Sustainability is about resources, climate, population, and other species, as well as money.

X: A possible factor in economic cycles is engagement and disengagment with reality. There is an analogy to be drawn between bipolar illness and the market.

A: Bipolar illness doesn’t have the regularity of the long Kondratieff cycles (K-waves). Goldstein wrote that “ the relatively fixed length of a generation” is like “a clock that links long waves to calendar time.” My demographic explanation has this regularity, its wavelength is 1.7 generations.

X: To clarify, I agree that the interest is paid with money that is in circulation. The new money is created at the point that the bank enters a loan into the account of the borrower. This new money is spent into circulation.

A: It doesn’t really matter whether the credit or the debt is defined as new money, as they are equal amounts of money. One is new money, the other is old money, one circulates, the other doesn‘t.

The debt doesn’t circulate, it stays in one place until it disappears when it is cancelled by the repayment by the borrower. Meanwhile the credit could more appropriately be described as “continuing to circulate”, not “being spent into circulation”.

X: My model of businesses A and B holds, because the only valid reason to borrow is to invest. One cannot sustainably borrow in order to provide for daily living needs.

A: Yes one can. Mortgages are an example. They are a way of transferring housing from old people to young people, while the interest on the mortgages transfers money in the other direction, to pensions.

X: Alison, will this cover it?

4 To pay back the interest means that the borrower either has to invest the loan to make a profit on the market, or from earning wages.

A: No, there is interest from other investments, or unearned money such as the scandalous capital gains in the last house price bubble, or pensions, or winning the lottery. Any of the money that is already in circulation may be used to pay the interest on a new loan.

Anyway I don’t see the point of line 4 unless you are wanting to prove that interest is unsustainable, and I don’t believe it is.

X: We need to sort out the impact of debt on growth. . . Hoogendijk has shown that debt necessitates ever increasing production and productivity.

A: I have shown that it doesn’t. Total debt may increase, decrease or be stable. I don’t know who Hoogendijk is, but he wouldn’t be the first expert who has been wrong.

X: Increasing productivity implies increasing unemployment, which entails increasing SS payments, which increases the country’s deficit. . . In order to attain a steady-state economy, which is what ecology requires, we need to ground our economics on ecological reality.

A: Yes, I agree. A Green tax shift from labour to resources and unearned capital gains from land is what is needed.

X: Interesting point from Atlanta Fed. If booms and busts cancel each other out, there has to be a better way of arranging things.

A: Its good that they cancel each other out but we need to make them smaller. Land tax, better management of protectionism, and better understanding of demography were my suggestions.

X: In the UK, they routinely produce 97% of new money.

A: This was your reply to my comment that the banks haven’t got a monopoly. . . See my next comment.

X: Leaving whether “Bank Monopoly” is precisely correct or not, the substantive proposal is that the ratio should move from 97/3 to ~50/50.
Does this meet with your approval?

A: Not really.

1. I wonder how enforceable a required reserve ratio is.
2. The most appropriate level of the ratio probably varies depending on whether stability or a boom or a bust is happening.
3. 50/50 may be too extreme. Between 2006 and 2009 the money multiplier, defined as “broad money relative to central bank money” or “the link between central bank money . . . and money in the economy”, was highest, at about 64, in early 2007, and lowest, at about 25, in late 2008. (Financial Times, 6 March 2009)

So the ratio of broad money to the total of central bank money plus broad money varied between 25/26 and 64/65. That‘s between 96.2% and 98.5%, in three years in which there was a transition from a major bubble to an exceptionally large crash. So a reduction to 50% might be too revolutionary.

A: So in the last 2 days we have found lots more disagreements, about growth, cycles, money creation, sustainable borrowing, interest, debt, cycles, broad money, money multipliers.

Its been interesting but I need to get on with the rest of my life, and don’t want to get involved in the wiki.